India trade deficit narrowed in Feb ahead of Middle East crisis

India’s merchandise trade deficit narrowed to $27.1 billion in February from $34.68 billion in January, offering brief relief ahead of a Middle East crisis that now risks raising the country’s import bill and straining trade flows.

The improvement was driven mainly by a pullback in imports rather than stronger exports. Goods imports fell to $63.71 billion in February from $71.24 billion in January, while exports remained broadly unchanged at $36.61 billion, according to government data.

That leaves India’s export momentum largely flat despite the narrower deficit, underscoring the continued softness in global demand for manufactured goods.

January’s trade numbers had been pushed sharply higher by a surge in precious metals imports, particularly gold and silver, which inflated the deficit to $34.68 billion, one of the widest monthly gaps in recent months. As those inflows eased in February, the headline deficit narrowed.

Even with the sequential improvement, the underlying imbalance remains large. Imports were still nearly three quarters higher than exports, reflecting India’s dependence on foreign energy, electronics and industrial inputs.

The narrowing deficit also masks a wider year-on-year gap. In February 2025, the merchandise trade deficit stood at roughly $14 billion, about half the current level.

India’s broader trade picture has been supported by strong services exports, including software and professional services, which helped lift total exports in February.

But the goods trade balance remains sensitive to global energy prices. India imports more than 80% of its crude oil, leaving the external account vulnerable to any sustained rise in fuel costs.

That risk has intensified as tensions in the Middle East threaten shipments through the Strait of Hormuz, a critical route for India’s energy supplies.

If oil prices remain elevated or shipping disruptions worsen, the February improvement in India’s trade balance could prove temporary in the months ahead.

India’s total exports of goods and services rose to $76.13 billion in February, up 11.05% from a year earlier, while imports climbed 21.64% to $80.09 billion, according to government estimates. That left an overall trade deficit of $3.96 billion, compared with a $2.72 billion surplus in February last year.

Services exports remained a bright spot. Shipments of services were estimated at $39.53 billion in February, up from $31.65 billion a year earlier, while services imports rose modestly to $16.38 billion.

For the fiscal year so far, India’s combined exports of goods and services during April–February reached $790.86 billion, an increase of 5.79% from $747.58 billion in the same period a year earlier. Imports rose faster, climbing 7.37% to $900.51 billion, leaving a cumulative trade deficit of $109.64 billion.

Merchandise exports during the same period rose only 1.84% to $402.93 billion, underscoring the slower pace of goods trade compared with services. Imports of merchandise goods increased to $713.53 billion from $657.46 billion a year earlier, pushing the cumulative merchandise trade deficit to $310.60 billion.

Export performance remained uneven across sectors. Engineering goods, India’s largest merchandise export category, rose 12.9% year-on-year to $10.36 billion in February, while electronic goods exports increased 10.37% to $4.18 billion. Organic and inorganic chemicals exports rose 6.85%, and gems and jewellery shipments increased 4.08%.

Agricultural exports also recorded gains. Shipments of meat, dairy and poultry products climbed 22.66%, while exports of marine products, handicrafts, and ceramic products and glassware also posted growth during the month.

Trade flows with several Asian markets strengthened. Exports to China, Hong Kong, Vietnam, Togo, and Sri Lanka posted strong increases in February compared with a year earlier, according to commerce ministry data.

At the same time, imports continued to rise from key suppliers including China, the United States, and the United Arab Emirates, reflecting strong domestic demand for industrial inputs, electronics and energy.

Exports to Togo, which jumped 110.96%, likely reflect shipments routed through the Port of Lomé, a regional trading hub that supplies landlocked West African markets such as Burkina Faso, Niger and Mali. The surge may also be tied to the timing of bulk cargoes such as refined fuel, rice or engineering goods, which can produce sharp percentage swings from a small base.

The trade data comes as global trade faces renewed uncertainty from rising tariffs and protectionist measures across major economies. Escalating trade tensions among the US, China and parts of Europe are beginning to reshape supply chains and redirect trade flows worldwide.